{"id":325247,"date":"2023-10-08T15:05:13","date_gmt":"2023-10-08T07:05:13","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=325247"},"modified":"2023-10-08T15:05:15","modified_gmt":"2023-10-08T07:05:15","slug":"stock-in-focus-wilcon-depot-wlcon-9-oct-2023-by-ap-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-wilcon-depot-wlcon-9-oct-2023-by-ap-securities\/","title":{"rendered":"Stock in Focus: Wilcon Depot (WLCON) – 9 Oct 2023 by AP Securities"},"content":{"rendered":"\n

Summary of Broker’s Recommendation<\/h2>\n\n\n\n
Stock Code<\/strong><\/td>WLCON<\/td><\/tr>
Company Name<\/strong><\/td>Wilcon Depot Inc.<\/td><\/tr>
Broker<\/strong><\/td>AP Securities<\/td><\/tr>
Opinion Issued on<\/strong><\/td>9 Oct 2023<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 32.50<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
<\/div>\n\n\n\n

Challenging macro environment, but price is cheap. With surging oil prices, plateauing GDP, and upside risks to inflation, we acknowledge that the coming months will likely be an uphill battle for retailers. Nevertheless, for WLCON we note that much of the negatives already seem to be priced in. <\/p>\n\n\n\n

At our 2023 EPS of P0.96\/share, we note that WLCON\u2019s forward P\/E comes in at 22.1x which is a 35% markdown when compared to the stock\u2019s historical P\/E. We also note that our EPS already factors in tepid conditions and is also slightly lower than the consensus\u2019 EPS of P0.98\/share. As such, we have a BUY recommendation on WLCON with a Target Price of P32.50 per share.<\/p>\n\n\n\n

<\/div>\n\n\n\n

Analysis and Opinion<\/h2>\n\n\n\n

Beneficiary of the weaker Yuan<\/h3>\n\n\n\n

While most companies in the consumer sector are at a tough spot given the year-to-date (YTD) depreciation in USDPHP, WLCON is one of the few who remains insulated against this. This is because of the fact that WLCON imports a majority of its inventory from China, with 80% of its in-house brands coming from the region. Given that in-house and exclusive brands comprise slightly more than 50% of their total sales, we see the weakness in China\u2019s currency as a boon to the company\u2019s gross margins. <\/p>\n\n\n\n

The Yuan is currently down 2.9% YTD relative to the Peso, and on a quarter-on-quarter (QoQ) basis the former has weakened by an average of 2.6% relative to the latter. As long as WLCON can sustain the sales volumes and current share of in-house and exclusive brands in its sales mix, then the favorable currency movement alone may already be enough to add a couple of basis points QoQ to gross margins.<\/p>\n\n\n\n

Potential reinforcements from OFW remittances<\/h3>\n\n\n\n

Further doubling down on the currency theme, we also observed that since 2015, OFW remittances for Q3 tended to usually come in stronger versus Q2. On a median basis, remittances for Q3 are 2.3% higher than in the previous quarter. <\/p>\n\n\n\n

With the USDPHP having hovered around the 56 to 57 level since August, there is a strong possibility that the overall peso value for remittances in 3Q 2023 will be much stronger in comparison to 2Q2023. This could very well help breathe life into WLCON\u2019s sales, which suffered from demand erosion during the second quarter of the year.<\/p>\n\n\n\n

<\/div>\n\n\n\n

Check how many brokers recommend this stock<\/h2>\n\n\n\n
\n
All Stock Rankings<\/a><\/blockquote>